CANADA FX DEBT-C$ holds steady following mixed North American data

Thu May 30, 2013 9:57am EDT
 
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* C$ at C$1.0352 vs US$, or 96.60 U.S. cents
    * U.S. jobless claims rise, Q1 GDP estimates scaled back
    * Canadian PPI down for first time in five months; Q1
current account gap narrows
    * Japan's public pension fund considers more flexible
investing strategy
    * Yield for 10-year government bonds highest in more than
year

    By Solarina Ho
    TORONTO, May 30 (Reuters) - The Canadian dollar on Thursday
trimmed losses against the U.S. dollar, which weakened against a
string of currencies after data showed U.S. jobless claims rose
and estimates of first-quarter U.S. economic growth were scaled
back.
    The Canadian dollar's retreat this past month was largely
driven by broad strength in the greenback. Thursday's U.S. data,
however, reinforced the view that the U.S. economy may be
entering yet another soft patch. 
    In Canada, producer prices were down for the first time in
five months, while the current account gap narrowed in the first
quarter.  
    The Canadian currency's strength was capped, however,
following a Reuters story that said Japan's public pension fund
- worth over $1 trillion - was considering a change in strategy.
 
    "We actually had a current account in Canada that was
slightly better than market expectations, but weighing against
that is that most of the commodity currencies are lower today,"
said Mark Chandler, head of Canadian fixed income and currency
strategy at RBC Capital Markets. 
    "The thing that's getting a lot of chatter is the potential
in Japan for the pension fund there to start reallocating toward
domestic equities and away from international assets. That's
weighting a little bit on commodity currencies."
    At 9:40 a.m. (1340 GMT), the Canadian dollar was
trading at C$1.0352 versus the U.S. dollar, or 96.60 U.S. cents,
stronger than shortly before the data was released, and
unchanged from Wednesday's North American close.
    Canada's dollar was generally underperforming against other
currencies, but was slightly stronger against its
commodities-linked sister currencies, the Australian 
and New Zealand dollars.
    Looking ahead, quarterly and monthly gross domestic product
data out of Canada will be released tomorrow. First quarter GDP
is expected to rise 2.3 percent on an annualized basis,
according to a Reuters poll. 
    "The improvement in the goods account reaffirms our
expectation that net exports are poised to be a meaningful
contributor to Q1 GDP," Mazen Issa, Canada macro strategist at
TD Securities wrote in a note to clients.
    "More importantly, the contribution from net exports will
reflect positive underpinnings - that is, the trade improvement
will be driven by strength in exports."
    Canadian government bond prices were mixed, with the
two-year bond up half a Canadian cent to yield 1.074
percent and the benchmark 10-year bond off half a
Canadian cent to yield 2.073 percent, its highest yield in more
than a year.